Claiming work-related deductions? Make sure you can substantiate your expenses
In 2017-18, Australian taxpayers claimed almost $22 billion in tax deductions for work-related expenses. As the ATO scrutinises deductions claimed, it's more important than ever that you are able to substantiate them.
Last financial year, over 8.8 million Australian taxpayers claimed $21.98 billion in deductions for work related expenses. It's an area under intense review by the ATO.
If you claim work-related deductions, it's important to ensure that you are able to substantiate any claim you make.
What can you claim?
To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, in most cases you need a record proving you incurred the expense, and the expense has to be directly related to how you earn your income.
What this means is that the expense is directly (not sort of) related to your work. This also means ensuring that you only claim the work-related portion of items you use personally, such as mobile phones or internet services.
When you don't have to keep records
If your claim for work related deductions is below $300 you do not have to keep a record of the expense, such as a receipt. Work related clothing has a $150 record keeping limit. However, the ATO is concerned that taxpayers are 'automatically' claiming these deductions without incurring any expenses because of a belief that you don't have to support the claim.
If you have claimed an amount up to the record keeping threshold, you may find that the ATO will ask you to explain how you came to that amount. If you don't have diary entries or a good explanation, your claim might be denied.
Working from home
If you don't have a dedicated work area but you do some work on the couch or at the dining room table, you can claim some of your expenses like the work-related portion of your phone and internet expenses and the decline in value of your computer.
If you have a dedicated work area, there are a few more expenses you can claim including some of the running costs of your home such as a portion of your electricity expenses and the decline in value of office equipment.
If your home is your principal place of business, you might be able to claim a range of expenses related to the portion of your home set aside for your business. What the ATO is looking for is an identifiable area of the home used for business.
Ensure any claims are in proportion to the work related use. You can't, for example, claim all of your internet expenses because you do a bit of work from home in the evenings and need the internet.
Work related clothing
In general, you cannot claim the cost of your work clothes or dry cleaning expenses unless the clothes are occupation specific, such as chefs whites or a uniform with a logo, or protective gear because your workplace has hazards (jeans don't count as protective wear).
Just because you have to wear a suit to work does not make it deductible.
If in doubt, check with your accountant.
If you're not sure that you've got your work-related deductions right, then the best starting point is to speak to your accountant, who will be able to review your deductions and claim amounts. Contact us on 02 9957 4033 for more information.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.